Mr Bhatt was suspended in 2011 for not showing up at work, for misusing his official car and for threatening a constable.
Finally removed from service today after serving 27 years in the Indian Police Service. Once again eligible for employment. :) Any takers?- Sanjiv Bhatt IPS (@sanjivbhatt) August 19, 2015
The Indian Police Service officer became famous for alleging that Narendra Modi, then Chief Minister of Gujarat, was complicit in the riots of 2002, in which more than 1000 people were killed. His claims were rejected by the Special Investigation Team appointed by the Supreme Court to probe nine riots related cases.
Mr Modi, who took over as prime minister after winning the national election last year, has never been found guilty of wrongdoing over the riots, and has denied any role in them.
On social media, Sanjiv Bhatt said the grounds for his sacking -- unauthorised absence from duty - relates to the time he was testifying before the Special Investigation Team and the Nanavati commission on riots cases. He has also claimed he could not attend office because his mother was unwell.
The Union home minister had reportedly recommended his sacking in September last year, but the clearance came now.
The government's move comes two days after Mr Bhatt was served notice on a controversial video. In the 11-minute video clip, a person purported to be Mr Bhatt was seen with an unknown woman.
The state government said forensic tests had proved that Mr Bhatt was having an affair with a woman other than his wife, which, the notice said, was conduct unbecoming of an IPS officer and violation of service rules.
Mr Bhatt has denied that he was in the video clip; he said he was ready for a "detailed biometric examination" to prove it.